>> tom: tax cuts, small business incentives, job hiring subsidies-- what will it take to stimulate the economy now? >> do they propose something knowing that it has a low likelihood of getting passed, in which case they look ineffective, or do they look like they are not paying attention to what's going on in the economy? >> susie: we'll look at the obama administration's options for getting americans back to work and getting consumers spending again. you're watching "nightly business report" for wednesday, september 1. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

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>> susie: good evening everyone. encouraging economic news today encouraged investors to buy stocks. tom, it was a grand kickoff for september. the dow surged more than 250 points-- 2.5%-- its best one-day gain since early july. a key manufacturing index showed american factories were working harder in august than a month earlier. the institute for supply management's index rose to 56.3 management's index rose to 56.3 from 55.5 in july, higher than forecast. a reading above 50 indicates growth. this index has been up for 13 straight months. >> susie: still, the big worry for everyone? the weak job market. private payroll firm a.d.p. reported 10,000 fewer jobs last month. the government report comes out friday, and many people are hoping washington will come to the rescue with another plan to boost hiring. washington bureau chief darren gersh reports.

>> reporter: spoiler alert! if you are looking for congress to come back from summer break rested and ready to pass a big plan to keep the economy on track, don't listen to what andy lapperiere has to say. >> in terms of getting some real action out of congress that's going to have a big impact on the economy, i think that is pretty unlikely. >> reporter: unlikely because policy makers disagree about the economic outlook. on top of that, they disagree about what economic medicine works best. progressives want to help for cash-squeezed small businesses, something the obama administration is already pushing. add to that more help for state and local government, more unemployment benefits, and investments in infrastructure and green energy. the goal, says christian weller, is to get cash to consumers who will spend it. >> those kinds of measures are targeted, they are very efficient and they can give a real oompf to the economy and make sure that the recovery ultimately becomes self- sustaining. >> reporter: economist doug holtz-eakin says it's easy to see how conservatives will react

to that kind of plan. >> they will laugh and say "this is not really stimulus, this is not anything more than re-warmed bad ideas." they'll really revolt against that. >> reporter: so what could make it on the stimulus menu? one possibility the obama administration and many republicans are considering is some kind of temporary cut in the payroll taxes both workers and employers pay. so its not necessarily a tax cut for corporations. it's not quite as much seen that way. it seems more as a cut for labor, and so that might appeal more to democrats. and certainly would appeal to republicans as well. >> reporter: after the election, expect talk to turn to an overhaul of the nation's corporate and individual income tax system. >> it's the only way to solve the problem of keeping tax rates low-- which republicans want-- raising enough money-- which democrats want-- and having the economy grow. so that will be a top item in the congress to come. >> reporter: but that's after the elections. later this month, the senate will vote on extending most of the bush tax cuts.

and no one here can really say how that vote will go. darren gersh, "nightly business report," washington. >> tom: here are the stories in tonight's n.b.r. newswheel: as we mentioned, september started with a bang. the dow spiked nearly 255 points, the nasdaq rose nearly 63 and the s&p 500 added 31 with today's buying, volume on the big board at 1.2 billion shares was down a bit from yesterday. nasdaq volume was even with yesterday's pace. federal bank regulators defended their actions leading up to the collapse of lehman brothers and how they handled the purchase of wachovia. they were testifying before the financial crisis inquiry commission. but former lehman c.e.o. richard fuld said his firm failed only because the federal reserve did not step in. fuld testified that if temporary financing had been available, lehman could have avoided bankruptcy. businesses and residents along the east coast are keeping a close eye on the tropics. forecasters say hurricane earl

is once again a category four storm, with sustained winds of 135 miles per hour. behind earl is tropical storm fiona, and behind her, the seventh tropical storm of the season-- named gaston-- formed late this afternoon. >> susie: still ahead, apple takes a bite out of t.v. and returns to its roots with a new line of ipods. >> tom: august was an awful month for most automakers. sales slumped significantly compared to a year earlier, when the cash for clunkers program sent consumers running into showrooms. sales at toyota, honda, general motors and ford all dropped by double digits. toyota was the worst, off 34% last month. by the way, toyota is the only major automaker to see falling sales for the first eight months of this year. as for the rest of the august numbers, honda fell 33%. a 25% fall-off at g.m. ends ten straight months of higher sales. the same goes for ford, with a drop of 11%. bucking the trend, chrysler's

new jeep grand cherokee helped it ride out the rough month. chrysler sales were up almost 7%. >> susie: mercedes benz also saw more buyers in the u.s. last month. sales rose 15% as it continues to see its american business grow. i went today to a mercedes dealership in union, new jersey, to find out what's driving those robust sales. it's an alphabet of success stories. "c" class, "e" class, "s" class, and even the s.l.s. no matter which mercedes it is, consumers are driving off with these luxury sedans. sales of the new e-class models are up 71% so far this year, and-- for all mercedes vehicles sold in the u.s.-- up more than 22%. the c.e.o. of mercedes u.s.a. expects business for the german automaker will stay in the fast lane. >> i think we'll be able to keep that pace. we were hoping for a little bit of an increase, but we're happy if it

stays on that level. there is a good chance it will. but we'll have to wait and see what september brings. >> susie: ernst, in this type economy, how is it consumers can buy a new car, let alone a mercedes. >> i think a lot of people are at the point where they do need a new car. they're hesitant, but they need it, and they're looking around and looking for good value and new product, and something which keeps its value. i believe that's why we're on the shopping list for a lot of the new costumers we're seeing. >> susie: are those strong sales because you're offering special financing deals? >> no, susie w-don't do that. we don't go down to 0%. you offer some sort of incentive, but nothing like 0%. >> susie: economists are predicting slow growth over the next couple of years, how will it impact your business? >> the luxury parts are tied very close to real

estate, tied to credit. we'll see a slowdown. if that slows down. and if there is a pick yup, we'll see a pickup. >> susie: analysting are forecasting more than 11 million, and that is up from last year, but not as hhigh as last year. do you think the auto industry is turning the corner? >> it is turning, but is it turning to the degree we would all like to see it? isli would say no. it is so far away from 16 million, and we still have to adjust our inventories and production and watch what this market is going to do. >> susie: you heard the news that the government wants to label new cars with a label grade from "a" plus to "d." what level do you think mercedes is going to get? >> you have to look at the individual models. the super "s" will probably be a "d." fuel consumption is not that day op that car.

there are other attributes on that. the 350 blue tech diesel, that car just introduced in august, that is probably "a" plus. 33 miles on the highway, and a range of nearly 700 miles with one fillup. this is something great. >> susie: how do you see mercedes evolving to compete where consumers want fuel-efficient cars. >> we further developed the combustion engines, higher fuel-efficiency, and we have hybrid models ready today which will be further developed. and we go to the third direction, which is fuel cell, which we believe we have a real solution -- >> susie: later this year you're coming out with a hydrogen fuel cell vehicle? >> if the technology comes to a point where it is affordable, where we believe we can do it, this

could be our huge seller for us, not just in the u.s., but on a worldwide basis. it is a car with zero emissions. it only produces steam. >> susie: but can you make money on it? >> that's why we are putting so much money in it. we believe eventually we will be able to make money. but it is expensive, but it is the right solution. >> susie: and mercedes benz is an underwriting of "nightly business report."

>> tom: worries about the economy took a back seat thanks the better showing by u.s. manufacturers in august. let's take a look at tonight's "market focus." industrial, financial and energy stocks led the way up. all the major sectors were stronger. manufacturers like eaton were pumped up by the industry data showing a healthy expansion. eaton makes products for several industries including automotive, aerospace and even golf club grips. shares jumped almost 8% to a two-week high. engine marker cummins rallied more than 7%, recovering most of what it had lost since mid- august. the firm's corporate bond rating was upgraded by s&p. financial stocks also helped the market. bank of america was the biggest gainer of the dow industrials, up 6%. b. of a. was at a 52-week low just yesterday. j.p. morgan added almost 4%, as did citigroup.

all three were very active. smaller regional banking stocks saw bigger gains. alabama-based regions financial closed up 6.5%. two ohio-headquartered banks, keycorp and fifth third, also staged rallies of better than 5% each. oil prices staged a turnaround from their recent weakness, buoyed by the stronger manufacturing data here, as well as strong data from china. the higher oil prices fueled energy stock buying, especially among some oil and energy service companies. contract driller rowan is at a new four-month high tonight thanks to its 9% jump. analysts at jefferies report rowan has two new long-term deals in saudi arabia that pay rowan more than expected. coal miner massey caught a bid, up 7%. coal stocks were strong over talk of strong coal prices in overseas in china. we've seen take-over talk heat

up again this week with so much corporate and private equity cash on the sidelines. burger king is the latest focus of merger rumors. the chatter helped the stock jump more than 14% on very heavy volume. according to the "wall street journal," a british private equity firm is one of the interested buyers. the clothing business, from wholesale to retail, seems to be picking up, at least for this trio of stocks. men's clothing retailer joseph a. bank rallied almost 13% on five times its usual volume. profits were better than expected and margins expanded. women's wholesale clothing maker g3 apparel group jumped 16% on almost ten times its usual volume. it makes clothes for others like calvin klein. profits beat the street and it raised its outlook. now come the shoes. genesco runs shoe stores like journeys, and makes shoes too. as expected, it lost money in the latest quarter, but same- store sales and revenues were up. so was the stock, up 7%. liquor company brown-forman hit the skids with disappointing earnings and a sliding stock price.

earnings came in shy of estimates and down from a year ago, but sales of its biggest product, jack daniel's, were up. shares were the leading loser of the s&p 500 index, falling to a two-month low on heavy volume. some of the money to buy stocks today may have come out of the bond market, as interest rates were rising. the yield on the 10-year government benchmark bond jumped back above 2.5%. a week ago, it hit its lowest point since early 2009. and that's tonight's "market focus."

>> tom: investors have been call on telecom stocks to protect their portfolios all summer long. since the third quarter began, the s&p 500 is up almost 5%. but how about telecom services. that sector up more than 12%. tonight's "street critique" guest joins us from the bank of new york. it is jonathan chaplin at credit suisse. welcome to "nightly business report." >> thanks, tom. >> tom: what has been fueling this performance that we've seen over the last quarter or so in telecom? >> i think it is pretty straightforward. it is primarily one thing: it's yield. as investors get concerned about growth concerns for the economy, 6% dividend yield for at&t and verizon stocks looks in increasingly compelling. you've got a better prospect of getting a return from that yield than other sectors in the

economy. >> tom: it sounds like quite a defensive play. but what about the growth expectations for this sector? are there any? >> it is not going to be a sector that grows the top line at g.d.p. or above for the foreseeable future. but this is a company that can -- an industry that can generate a fair amount of earnings growth in the low-growth economic environment. so with 1% revenue growth, telecom companies can generally knock out 3 3 plus percent earnings growth. >> tom: one of your top picks in sprint, which doesn't necessarily feed into the dividend play because it doesn't play shareholders, but it is a turnaround story, up 17%. what's the next catalyst? >> i think we've got a couple of catalysts ahead of us. it is our top pick and the sector. despite the fact that you're right, it doesn't fit in with our macro view of the economy. the catalyst coming up,

we've just seen subscriber growth for the first time in three and a half years. it will generate into revenue growth, which will translate into very significant ebida growth. and as you go from a declining business to a growing business, we think the business starts to get an appreciably different multiple than it has gotten in the past. beyond that, i think there is a tremendous opportunity for margin expansion here. once they return to growth, they can start looking at the cost structure and taking out a lot of inefficiencies in the business and capturing margin. >> tom: we have to talk about the biggies, at&t and verizon. at&t shares over the last 12 months are up about 8%. verizon, however, vz, is down about 3/10 of a percent. how do you explain that difference and how do you choose between the two? >> i think it is really tough to choose between the two. if you're investing in this group on the basis of the macro deis, you own

both of them. we look at it at&t trades at a fairly big discount, and verizon on a p.e. basis. and it is a bigger discount than we've seen historically between these two stocks. having said that, there is a decent prospect for verizon growing revenue at a slightly faster rate than at&t over the next couple of years at at&t lose their iphone exclusivity, and verizon sees smart phone growth. >> tom: jonathan, any disclosures for at&t, verizon or sprint? >> i don't own any of them, but i suspect we do investing backing for all of them. >> tom: in jonathan chaplin here with "street critique" with credit suisse. >> susie: it is always a full house when steve jobs calls a meeting, and today was no exception. apple's c.e.o. took the wraps off a new line of his company's market-leading ipod music and video players. and, he presented a new

internet-based television product with a bargain basement price. scott gurvey takes a look. >> reporter: it's not the first time apple has taken a stab at the internet t.v. market. the apple t.v. unveiled today is smaller and cheaper than the model which first shipped in 2007. the $99 product will deliver $5 movies the same day they are released on d.v.d. but, with only abc and fox willing to support apple's $0.99 t.v.-show rental model, analyst clyde montevirgen is skeptical it will sell any better than its predecessor-- at least in the near term. >> we think that apple will need to get all the major channels on board in order for their offering to be widely used to the level that i think the media wants to see apple t.v. progress. this product hasn't really done much in the past, but as the set-top box industry grows and prices lower, we should start seeing more traction ahead. >> reporter: apple is not alone in this market. roku, google, microsoft and others have all tried to lure viewers away from their

traditional cable service. but, most studies show people still find internet t.v. too complicated and too unreliable for their tastes. apple is expected to get a much warmer welcome for a whole host of ipod product updates also announced today. a new ipod touch gets a front- facing camera and video chat. a new ipod nano has a touch screen which eliminates the need for buttons. and a new ipod shuffle will sell for $50. montevirgen predicts all the ipods will sell well in the holiday season. scott gurvey, "nightly business report," new york. >> susie: here's what we're watching for tomorrow: the revised numbers on productivity in the second quarter, as well as july's reports on pending home sales and factory orders. we'll also see chain store sales for august. and, fed chairman ben bernanke testifies about his role in the bank bailouts at the financial crisis inquiry commission.

>> susie: a new wrinkle for botox maker allergan. it will plead guilty and pay $600 million to settle charges that it sold the facial smoother by using misleading marketing. the justice department says allergan promoted botox for uses that were not approved as safe and affective. the drug is very popular. last year it racked up more than $1 billion in sales, for both therapeutic and cosmetic use. >> tom: forget about whipping out your visa card to pay for purchases-- put it on your phone instead. wells fargo is the latest bank to partner with visa on a new system to let customers charge with their smartphones. the new technology is aimed at developing what's called a "digital wallet," where a phone can do banking and other financial transactions. bank of america and u.s. bancorp are also in pilot programs with visa. look for the test systems to be up and running-- and charging-- next year.

>> susie: a stunning statistic: americans now owe more money in student loans than credit card debt. as of june, that student loan amount stood at $826 billion, due in part to rising college costs. tonight's "money file" has some thoughts on colleges getting back to basics to lower costs. here's manisha takor, co-author of "on my own two feet."

>> for decades, the path to the american dream was crystal clear. go to college and get a great job. the key to this scenario was that you would earn significantly more over the course of your working life with a degree than without. fast forward to today, and millions of graduates are questioning whether the tassel is worth the financial hassle. it is not uncommon to meet a smart liberal arts graduate with $100,000 in student loan debt applying for dream jobs with salaries that max out at $50,000 a year. the math of paying off this kind of debt burden just doesn't work. if that student pays off those loans over a normal 10, 20 or even 30-year period, they will be hard pressed to have extra funds to save for a car, house, or their children's educations. how did we get here? the reasons are varied, but the one i'd like to focus on tonight is that, as college and university campuses competed for students, they built dorms, sports complexes and dining

halls that rival five-star hotels. to finance this, tuitions had to grow faster than the wages of graduates. i believe the tassel is worth the hassle, and that education is one investment that gives lifelong dividends. but for that education to pay off over the long run, it can't be bought at any old price. it's time to reassess whether we want our higher institutions investing in bleachers or books. i'm manisha thakor. >> tom: that's "nightly business report" for wednesday, september 1. i'm tom hudson. good night everyone, and good night to you too susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

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